Mylan’s (MYL - Analyst Report) fourth-quarter 2014 earnings (excluding special items) of $1.05 per share beat the Zacks Consensus Estimate by a penny. Earnings in the fourth quarter of 2014 increased 35% from the year-ago quarter. Earnings benefited from higher revenues and higher gross margins.

Mylan Inc. - Quarterly EPS | FindTheCompany

On a reported basis (including special items), fourth-quarter 2014 earnings increased 4% to 47 cents per share. Revenues climbed 15% to $2.08 billion, broadly in line with the Zacks Consensus Estimate. Mylan recorded year-over-year growth on the back of double-digit revenue growth in both the Specialty and Generics segments.

The company’s full-year earnings were up 23% from the prior year to $3.56 per share, a penny above the Zacks Consensus Estimate. Revenues came in at $7.7 billion, increasing 12% and broadly in line with the Zacks Consensus Estimate.

Fourth Quarter in Details

Generics third-party net sales, derived from sales in North America, Europe and rest of the world, climbed 12% to $1.82 billion. Segmental third-party net sales grew 17% to $1 billion in North America. New product launches aided revenues.

Third-party net sales from the European market decreased 1% to $373.4 million due to unfavorable currency translations. Third party net sales from rest of the world rose 13% to $441 million. Segmental performance improved on the back of increased sales of its antiretroviral products in India. Performance in emerging markets and Brazil was also strong during the quarter.

Third-party net sales in the Specialty segment jumped 38% to $242.7 million. Specialty segment sales were boosted by the strong performance of its flagship product – EpiPen Auto-Injector – for severe allergic reactions. Sales of the product improved due to increased volume and favorable pricing.

Adjusted gross margin during the fourth quarter of 2014 expanded to 54% from 51% in the year-ago quarter on the back of strong sales of EpiPen Auto-Injector and new products.

2015 Outlook

Mylan expects adjusted earnings per share in the range of $4.00 to $4.30, representing an increase of 17%. The company expects revenues in the range of $9.7 billion to $10.1 billion, up 28% from 2014. The Generics segment is expected to see revenue growth of approximately 40% in 2015. The guidance assumes the launch of AB-rated generic Copaxone in the second half of 2015.

Specialty revenues are expected to be flat in 2015. The company expects to face generic competition for EpiPen Auto-Injector in the second half of 2015.

The guidance includes contributions from the business acquired from Abbott Laboratories (ABT - Analyst Report) and the pending Famy Care acquisition. The products acquired from Abbott are expected to generate revenues of approximately $1.5 billion to $1.8 billion in 2015. Foreign exchange translations are expected to impact revenues by approximately $300 million to $400 million.

The Zacks Consensus Estimate for 2015 earnings is at $4.15 per share on revenues of approximately $9.2 billion.

The company expects adjusted earnings per share to be flat in the first quarter with growth expected in the following three quarters of 2015. Third-quarter earnings are expected to be the strongest.

Our Take

Mylan’s fourth-quarter results were better than expected with the company beating on earnings. Revenues were driven by strong sales in the Specialty segment. We are looking forward to the potential launch of generic versions of Copaxone, which should boost revenues further. We are pleased with the company’s 2015 guidance.

We remain positive on Mylan’s deal with Abbott. The deal is expected to be accretive to earnings by approximately 20 cents in 2015 and to increase thereafter through 2018. Mylan’s agreement to acquire certain female health care businesses of Famy Care Limited, a privately held specialty women's health care company, is also encouraging. The deal is expected to complete in the second half of 2015. The Famy Care acquisition will also complement Mylan's acquisition of Abbott's ex-U.S. developed markets specialty and branded generics business including the women's health care portfolio and sales and marketing capabilities. Mylan is expected to remain active on the acquisition front in 2015 in order to drive long-term growth.

Mylan carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector include Cytokinetics, Inc (CYTK - Snapshot Report) and Alnylam Pharmaceuticals, Inc. (ALNY - Analyst Report). While Cytokinetics sports a Zacks Rank #1 (Strong Buy), Alnylam is a Zacks Rank #2 (Buy) stock.

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